Angela Merkel, the German chancellor, mounted stiff resistance tonight to any swift bailout of Greece, as a rift opened up between European capitals over how best to tackle the risks posed to the euro.

Despite a show of Franco-German unity on the crisis and the first statement from EU leaders pledging to safeguard the currency's stability, hopes on the markets of a German-led rescue plan to shore up Greece's critical public finances were dashed by Merkel, who repeatedly emphasised that Athens would need to put its own house in order and brushed aside all questions of financial support.

"See, I told you so.  Twice."

Someone forgot to tell the market pumpers (along with those who started buying Euros and Pounds against the dollar) that Greece is a bit player in this mess.

What 'ya gonna do about Ireland - a nation that has enough out there in bank debt to make Iceland look like a Girl Scout picnic?  Or Spain?  Portugal, which has had an actual failed bond auction already?

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One would hope that Merkel and friends in Germany aren't really stupid enough to implement such a transfer of a peripheral nation's problem to the EU's core, but then again we have seen time and time again that "can-kicking" is the mantra of the world since this crisis began.  Rather than deal with the underlying problems - excessive leverage, naked swaps that the seller can't possibly pay, various forms of fraud and gamesmanship in securities issue and similar - governments have instead decided to lift up the corner of the carpet and sweep, time and time again.

Should the EU implement this with Greece they may indeed set a precedent that could easily destroy the European Union over the next couple of years.  Faced with Spain, Portugal, Italy and Ireland, all of which are huge problems compared to Greece both in terms of the debt outstanding and the size of their economies Germany will find itself unable to backstop all four nations - yet it will have to, once the die is cast with Greece.

It appears that unlike Barack Obama and Ben-d-you-over-the-table Bernanke, who doesn't much care about the formalities of what's supposed to be on The Federal Reserve's balance sheet, Angela Merkel has both a brain and she clanks when she walks!

I like it, although I'm not so sure that Ms. Merkel would be so steadfast had she not the benefit of watching other fools, specifically Henry Paulson, from afar, and thus got to see that the market always calls bluffs.  She witnessed Fannie and Freddie's "Bazooka" and the non-bailout that was a bailout and then more bailout via TARP, AIG and others, and thus knows damn well that if she comes to the aid of Greece (assuming the German court system will let her) the PIIS (heh, that's a good acronym, no?), sans-Greece, will be there with hands outstretched instantly - and not by choice either.

Rather, the market will simply shift it's attention to Spain, Portugal, Ireland or all three, and place them under speculative attack until the story is repeated time and time again.

Germany simply lacks the ability to bail everyone out.

Our "officials" lacked the brainpower to recognize this even after having reality smash into their face at 450 mph in the form of a clue-by-four when Hank Paulson was so puerile as to threaten the market with his mighty "Bazooka".

He proceeded to blow off his own balls with that very bazooka just days later.

The market is bigger than any one man or any one nation and it does not suffer arrogance lightly.  Virtually everyone who has tried to tangle with it has wound up with their head between their legs after not only their head was chopped off but both arms as well.

If Ms. Merkel has learned this lesson adequately from the last three years then progress has indeed been made.  Perhaps she can put in a visit to Mr. Obama and whack him upside the head a few times, knocking some sense into that arrogant ass before he blows our nation to Hell with his belief that $1.6 trillion deficits are a "small mismatch" between spending and income - a mismatch that he largely created himself.

I wish Ms. Merkel luck dealing with her banks.  Don't think for a minute that they're not neck-deep in the sludge themselves - they are - or that somehow they're so much wiser than us in the land of beer and schnitzel - they're not.

But when it comes to the consequences of "bailout world", it appears that Angela Merkel has learned from the experience of others, and as such, she deserves - at least for today - a gold star.

We'll see if I have to revoke it tomorrow.